Integrated supply chain decisions with credit-linked demand: A Stackelberg approach

Market demand mostly possibly affected by the seller’s credit in many industrial practice, this study aims to investigate the beneficial performance of the supply chain considering the credit-linked demand under three different circumstance. We firstly develop a demand model which is a function of the trade credit period. Moreover, the supplier determines optimal trade credit period and the retailer determines optimal replenishment cycle time. Under these conditions, we first present optimal solutions for the centralized decision and the decentralized decision in Stackelberg models. Then, we develop a set of theorems to determine the optimal results. Finally, we provide a numerical example and sensitivity analysis to illustrate the efficiency of the proposed models and optimal solutions. The finding reveals that the trade credit period, replenishment cycle time, retailer’s profit, supplier’s profit and profit of the supply chain are strongly influenced by ordering cost, retail price, production cost, holding cost and the interest rate. In addition, we also find that under the condition of the trade credit, the supply chain that the supplier dominated has a better performance than that the retailer dominated. While when the supplier don’t provide the trade credit period, the result is the opposite.